EUROPE
The first half of 2024/25 essentially brought economic stagnation in Europe with marginally positive GDP growth rates close to zero. While sentiment indicators suggested an improvement in economic development at the start of the 2024/25 business year, sentiment deteriorated significantly as the year progressed. Both private consumption and the service sector, two of the growth drivers in the first quarter of the business year, deteriorated in the second quarter. The manufacturing industry had already shown very subdued momentum since the beginning of the reporting period and continued to weaken. Numerous well-known industrial companies revised their expectations downwards after Northern summer 2024 with profit warnings. Announcements of cost-cutting programs with large-scale job cuts not only worsened sentiment, but also called into question the resilience of the labor market to date. In this environment, inflation fell below the European Central Bank’s (ECB) 2% target towards the end of the reporting period. The ECB lowered interest rates by a quarter of a percentage point in June and September, and again in October after the reporting period, not only due to the significant fall in inflation, but also out of concern about an imminent sharp economic downturn.
Globally, Europe was by far the market with the most difficult conditions in the first half of 2024/25. The voestalpine strategy of occupying demanding niche markets proved its strengths and helped stabilize the Group’s earnings situation. For example, the railway infrastructure, aerospace, and warehouse technology market segments bucked the overall economic trend and performed very well throughout the first half of 2024/25. Active management was required in all other business segments in order to cope with the economic downturn in the best possible way. Where business areas were confronted with structural changes, voestalpine management responded with structural measures. Shortly after the end of the reporting period, the negotiations for the sale of Buderus Edelstahl were concluded with the signing of the contract, and the reorganization of the Automotive Components business in Germany also entered the implementation phase. These measures will improve the Group’s earning power and reduce voestalpine’s footprint in Europe, where the performance of the economic system is increasingly being affected by excessive regulation.
USA/NORTH AMERICA
In North America, economic growth remained on track in the first half of 2024/25. Unlike in Europe, the indicators at the start of the business year pointed to a slowdown in momentum, but this did not materialize as the year progressed. Economic development remained positive in the second quarter of the business year. Private consumption remained at a good level and was supported by both the solid financial situation of households and the increase in disposable income. Corporate profits also developed well and, as a result, so did the employment situation and the labor market.
Inflation improved in the direction of the Federal Reserve’s (Fed) 2% target. Against this backdrop, the Fed lowered interest rates by half a percentage point in September 2024.
Overall, demand in the American economic area was satisfactory for voestalpine. While private consumption was a key pillar of growth in the first half of 2024/25, demand from the capital goods sector was somewhat more restrained. Investments in oil and gas exploration declined noticeably over the course of the reporting period, while demand for voestalpine products in the railway infrastructure and warehouse technology sectors remained strong.
BRAZIL/SOUTH AMERICA
After previously high growth rates, economic momentum slowed at the start of the 2024/25 business year, but remained solid overall over the reporting period. Good development in the agricultural and service sectors was initially offset by somewhat subdued industrial production. The heavy rainfall and flooding in Brazil’s southernmost state of Rio Grande do Sul had a negative economic impact in the first quarter of the business year. In addition to temporary production stoppages, agriculture in this region was hit particularly hard. In the second quarter of 2024/25, reconstruction work began following the destruction.
Following interest rate cuts at the beginning of the current business year, there was some upward pressure on inflation in Brazil in the second quarter of the business year, to which the Brazilian central bank responded by raising interest rates by a quarter of a percentage point and setting the key interest rate at 10.75%.
The voestalpine sites in Brazil performed very solidly in this environment. Although demand momentum slowed slightly in some market segments in the first half of 2024/25, the sites were able to deliver a good performance overall thanks to active cost management.
CHINA/ASIA
Economic development in China remained on course for growth overall in the first half of the 2024/25 business year, but continued to be overshadowed by the unresolved problems in the real estate sector. These had a negative impact on sentiment and private consumer behavior in the reporting period. The latter was also influenced by the relatively high youth unemployment rate and generally deflationary price trends. On the other hand, industrial production continued to perform well. Significant growth was achieved in high-tech sectors in particular. This segment was one of the main drivers of China’s very good overall export performance in the first half of the 2024/25 business year.
At the end of September 2024, the People’s Bank of China announced a comprehensive stimulus package to support the economy and halt the downward trend in the real estate sector.
Overall, the Chinese economic region was a good environment for the voestalpine Group in the first half of 2024/25. The Chinese voestalpine sites have virtually no exposure to the regional real estate and construction sector, but manufacture products for the well-performing capital goods sector.